Agricultural cooperative CHS Inc. on Wednesday announced a strategic venture with Illinois-based fertilizer maker CF Industries Holdings, Inc. that includes a $2.8 billion investment by CHS in one of CF Industries’ subsidiaries.
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Given the dynamic market for nitrogen fertilizer manufacturing and distribution, investing in CF Nitrogen creates access to more immediate benefits to CHS owners and customers than a four-year plant construction window, Casale said.
CHS, the nation’s biggest farm cooperative and largest wholesaler of fertilizer, says it will buy up to 1.7 million tons of nitrogen fertilizer a year at market prices from CF. “In short, through CF Nitrogen, CHS will be able to add direct value and provide sustained access to dependable, patronage-eligible fertilizer products comparable to our successful 70-year-old petroleum refining platform”.
CF Nitrogen owns three of CF’s production facilities including Donaldson, Louisiana, Port Neal, Iowa, and Yazoo City, Mississippi.
At the same time, CHS also said it would no longer move forward on building a $3 billion fertilizer plant of its own in southeastern North Dakota. Prior to closing the CHS transaction CF expects to contribute its Woodward, Oklahoma facility to CF Nitrogen.
CHS’s semi-annual profit distributions from CF Nitrogen will be based generally on the volume of granular urea and UAN purchased by CHS pursuant to the supply agreement.
CHS spokesperson Lani Jordan calls the decision “difficult” but says it came down to economics and the return on investment for the co-op’s members. This arrangement will limit the marketing risk for some of CF’s capacity over the 80-year life of the contract, which is favorable as the nitrogen production capacity in North American continues to expand.
This document and other CHS Inc. publicly available documents contain, and CHS officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Report Act of 1995. The company supplies energy, crop nutrients, grain marketing services, animal feed, insurance, financial and risk management services, as well as food and food ingredients.
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The $3 billion project, announced in 2014, was expected to produce more than 2,400 tons of ammonia daily when completed in the first half of 2018.
